Doing your taxes good practice for reforming the IRS
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September 26, 1997
Web posted at: 10:08 a.m. EDT (1408 GMT)An essay by CNN Interactive writer Emily Looney
(CNN) -- Hearing allegations of IRS mistreatment of taxpayers aired on Capitol Hill this week no doubt was gratifying to untold numbers of citizens who, justified or not, feel wronged by the income-tax system.
But expecting fast and fair reform of the Internal Revenue Service may be as unreasonable as expecting to finish the 1040 tax form, correctly, in an hour.
The holdup on fast reform is the word "fair." We expect our tax collectors to do more than just collect taxes.
Our tax system is rightfully entangled with social agendas of distributing wealth more evenly. It is wrongfully burdened with tax-code complexity and mismanagement. The trick of reform will be preserving fairness amid the frustration.
The IRS, like the Mir space station, is struggling to hang on with outdated equipment. Before the tax system really runs amok, we need to overcome our hostile inertia toward it to fix it on two fronts.
The first front is our own vested interest in the current system.
The second area to address is found inside the IRS, whose complex management creates frustration for all involved and, by default, contributes to the uneven treatment of taxpayers.
Forget reform: 'I've got mine'
For an example of vested interests, one needs to look no further than last summer's tax cuts.
Per-child tax credits, education tax credits and lower capital gains and estate taxes sailed through Congress and the White House. Muttered doubts about the wisdom of these perks were drowned out by strong bipartisan support and a grateful public.
Whatever the merits of the new cuts, they come at the price of new doubts -- found house by house -- about whether we know about all the deductions we qualify for, or can even expect our accountants to keep up.
The tax changes added 820 pages to the 9,451-page Internal Revenue Code. That is what Sen. Patrick Moynihan told the Senate Finance Committee at hearings examining the findings of the bipartisan National Commission on Restructuring the IRS.
"I mean you could hurt yourself with that," the New York Democrat said, thumping a giant pile of papers onto a table. The whole code is now as bulky as two toe-stubbing boxes of office paper.
Meanwhile, while more than four in five Americans voluntarily pay Uncle Sam what they owe, nearly one in five doesn't. Among individuals, this so-called "gross income tax gap" added up to an estimated $95.3 billion in 1992.
Then there's the specter of the rich, who can afford better advice about using legal deductions to pare their share. In 1993, nearly 2,400 Americans earning at least $200,000 used the system so well that they owed no income tax at all, according to IRS figures.
Under such conditions, the self-preserving goal of grabbing every perk possible appears reasonable. But it's ugly to see ourselves and our leaders act this way, and it undermines the objective of fairness.
If it doesn't work, give it a kick
As to the second front of reform, the IRS is accountable to the Treasury Department and six different House and Senate committees -- leaving the agency and taxpayers coping with mixed signals about its mandate.
There's talk of fixing this. A Senate bill would create an oversight board of presidential appointees, confirmed by the Senate. The panel would work with Treasury and coordinate with Congress on IRS issues. In June, President Clinton created an advisory board to address IRS management.
But however much oversight is added to prevent the kind of wrongdoing reported to the Senate by the commission, including collection quotas and illegal assessments, the system is also subject to the whims of politics and personal habit.
A surprisingly successful experiment begun in fiscal 1995 to increase IRS authority to collect unpaid taxes was promptly killed as part of the Congressional changing of the guard from Democrats to Republicans.
And despite calls for greater efficiency, a lot of people still like to shuffle paper. While taxpayer filings by computer and telephone are rising, they still account for only a fraction of the total. Direct deposit of refunds -- a promising money-saver -- has yet to become standard practice.
For fiscal 1996, the IRS collected nearly 209 million tax returns worth $1.49 trillion. It did so despite budget cuts and shrinking staff, outmoded computers and, says Treasury Secretary Robert Rubin, reported threats and assaults on its workers.
A CNN/Time poll in March found that most people surveyed opposed abolishing the IRS and actually thought it did a good job. But 93 percent wanted changes, from completely replacing the system to more minor adjustments.
Changing the tax system fairly will be a lot like doing your taxes. At some point, you have to stop procrastinating, sit down and patiently work through the details. You can't fudge the figures forever, and you may have to file for an extension to get them all in order.
But as the IRS itself could tell you, paying attention to taxes now will be better than paying the penalties later.
Related sites:
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- The Internal Revenue Service
- The Senate Finance Committee
- Treasury Department
- Sen. Bob Kerrey testifies about IRS reform
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